Related articles

Eddie O’Gorman, of retirement planners The WAY Group, said: “The over-65s are now seen as an easy target for a Treasury keen to boost its coffers. It is doubly unfa?r that those who have diligently paid their dues in their working life are being squeezed yet again at a time when most retired workers get by on a very modest income.”

Older people in London pay the most on average, at £8,386 a year, while those in Wales pay the least, at £1,795, according to the findings.

Steve Wilkie, managing director at retirement specialists Responsible Life, said: “Many pensioners will be shocked to learn, and probably unaware, that they are paying such a huge portion of the UK’s income tax bill.

Almost £18bn a year is a staggering amount in income tax

Steve Wilkie managing director of Responsible Life

“Almost £18bn a year is a staggering amount in income tax, especially when you consider how vulnerable this group is, and how much they rely on their pension income in particular.

“And it must be especially galling at the moment, because many have seen very little return on their savings - stagnating in a low interest environment - and yet the tax man still takes his slice of their retirement pie.”

The tax take is also set to rise as more older people take advantage of new pension freedoms introduced in April which allow those aged 55-plus to cash in some or all of their pension pot.

While the first quarter of the pot is generally tax-free, the remainder is subject to tax.

GETTY

The rates of income tax paid by over-65s varies hugely throughout the UK

Figures recently released by the Financial Conduct Authority (FCA) showed that in the first three months following the introduction of the new pension freedoms, 204,581 customers accessed their pension savings and 120,688 consumers made some form of cash withdrawal.

Alan Higham, founder of the PensionsChamp financial website, pointed out that the Chancellor’s forecast of extra tax revenue from pensioners is likely to be too low and the older generation will face an even bigger bill.

He said: “Data released earlier this week by the FCA shows that 115,000 people fully cashed in their pension pot in the first three months of the new tax year with a further 56,000 also taking some of their pension as a lump sum.

“It is likely that the extra £380m tax estimated will prove far too low. Most people cashing in their pension will see tax deducted at around 35 per cent by the pension companies leaving people who pay no tax due to low income or just basic rate tax to claim the extra tax back. “Revenue and Customs may already have received more than the £380m in tax receipts to date.”

Gareth James, of investment group AJ Bell, added: “No one wants to pay more tax and that is particularly true for pensioners where their income might be lower than when they were working.

The new pension rules allow people to withdraw as much as they like from their pension but it will be taxed as income so pensioners should ensure the withdrawals they make do not push them unnecessarily into a higher tax bracket.”

The average annual amount paid by someone aged over 65 in Scotland is £2,855, while the typical bill for someone of this age in Northern Ireland is £2,824.

The average tax bill for over-65s across the UK was found to be £2,286 lower than that for someone aged under 65.

But in London, the gap was narrow, at £692 a year on average.

Stan Russell, a retirement income expert at Prudential, said: “The over-65s in London have either managed to secure themselves more comfortable retirement incomes or perhaps have been able to defer retirement and stay in well-paid employment for longer.

“But overall these figures show that just because someone has retired from work doesn’t mean they have retired from paying tax, so taking into account the impact on retirement income is an important part of planning for a comfortable retirement.”